Every business that sells products must have inventory. Without it, you simply won’t make a profit. However, figuring out your inventory needs can be a challenge.
You want to have enough so that you never need to tell a potential customer that you’re out of stock – these people could wind up visiting or buying from your competition. But you also don’t want to have so much inventory that you can’t possibly sell it all.
Many businesses, at some point or another, get an inventory loan. They’re often used to stock up for a busy season, prepare for an abnormally large order or expand their product offerings. While the loan can help make business operations run smoothly, it’s important to have a plan for how you’ll use the money.
Here are some tips to help you make the most of your inventory loan:
Count what you already have
The first thing you should know before purchasing more inventory is how much you already have. Tallying up your existing supplies is tedious, no doubt about it, but it’s crucial that you know exactly what’s in your warehouse, explained Entrepreneur contributor Mike Sowinski.
You may discover forgotten-about reserves of an in-demand product, or that a particular item hasn’t been selling as quickly as you thought. No matter what you uncover in your inventorying mission, it’ll help you make an informed decision about how to use your inventory loan.
Consider expiration dates
If you run a grocery store, a restaurant, a pharmacy or any other business that must adhere to strict expiration dates, it’s important to keep these in mind when you stock up. If you know that a particular product has a shelf life of two months, for example, don’t buy more than you know you can sell in that timeframe. If you over-invest, you could wind up with rotten supply and an underutilized inventory loan.
Track consumer behavior
Understanding when, why and how often your customers make purchases at your business will help you predict how much inventory you’ll need in the near and distant future. For example, most chocolatiers know that every Valentine’s Day, there will be a mad dash to buy sweets.
Unfortunately, consumer behavior is not always as obvious as February chocolate purchases. Keep a log of daily sales so you can determine your busy seasons. Issuing short surveys following a transaction can help you glean further valuable information, such as the impetus behind the purchase.
Determine your role in the market
Sowinski pointed out that some businesses can benefit from over-stocking on supplies that are continually relevant and have no expiration date. If you’re the go-to place for a particular item or category of items, it may be wise to have an abundant supply. This way, you’ll never have to turn away a new customer looking to stock up. In most cases, however, too much inventory can be a waste of money and storage space.
Have you determined how you can use an inventory loan? Reach out to National Funding to tell us about your business plans, and we’ll work with you to determine the best alternative loan for your business.